Retirement Overhaul Gets Push

Fed Chief Tells Congress To Act Quickly To Save Social Security

March 3, 2005|By Tamara Lytle, Washington Bureau Chief

WASHINGTON -- Even as polls indicate waning public support for overhauling Social Security, President Bush and Federal Reserve Chairman Alan Greenspan turned up the heat Wednesday on Congress to act quickly to revamp the retirement program.

According to the polls, only young people, who under the Bush proposal would be allowed to invest part of their Social Security tax money in personal accounts, strongly support the idea.

Greenspan, a supporter of private accounts, warned the House Budget Committee that speedy action is needed to shore up Social Security because the federal government has promised the baby-boom generation more than it can deliver in retirement benefits.

"We owe future retirees as much time as possible to adjust their plans for work, saving and retirement spending," Greenspan said.

Bush hammered home the need for change during a White House meeting with Republican lawmakers and in a speech to college students in Maryland.

"You need to be [telling] people like me and members of the United States Congress, `You better fix it before it becomes a crisis. Don't be passing on problems to future generations,' " Bush told the students. "Members of Congress were elected to solve problems now."

Bush's proposal has run into stiff resistance from Democrats and the senior lobby AARP, which have opposed the president's idea of cutting the guaranteed benefits of future retirees in exchange for the accounts.

Even some Republican lawmakers have said they are reluctant to push too quickly for a plan that has so far not gained traction with the public.

Polls show support for Bush's plan is especially unpopular among the elderly, although his proposal would make no changes to benefits for anyone 55 or older.

A poll released Wednesday by the Pew Research Center showed that 66 percent of those ages 18 to 29 support private accounts, up from 64 percent in December. But in every other age group, support has dropped. Among the 30 to 49 age group, 49 percent are in favor, down from 56 percent in December. Among 50- to 64-year-olds, 41 percent like the plan, down from 51 percent. Among those 65 and older, 25 percent support it, down from 40 percent.

"I can tell the popularity of personal accounts by how old you are," said Sen. Rick Santorum, R-Pa., a supporter of private accounts. "If you're 55, you don't like them. If you're 25, you'll give up almost everything to get them."

The Bush administration has begun a national blitz to change minds. The president met with lawmakers Wednesday, including Rep. Ileana Ros-Lehtinen, R-Miami, and Rep. C.W. "Bill" Young, R-Indian Shores. Bush travels to New Jersey and Indiana on Friday.

Treasury Secretary John Snow announced Wednesday that starting today the administration will launch a 60-day, 60-city campaign using Bush and other high-ranking officials to sell the plan.

On Capitol Hill, the issue already has degenerated into a war of words.

House Majority Leader Tom DeLay, R-Texas, attacked the AARP on Wednesday, accusing the powerful lobby of irresponsibility for opposing Bush's plan before it is fully written. House Speaker Dennis Hastert called Democrats "the party of no."

But House Democratic Whip Steny Hoyer of Maryland said the comments show desperation and "frustration at failing to hoodwink the American people into supporting Social Security privatization."

House Minority Leader Nancy Pelosi, D-Calif., said her party would be willing to work with Republicans but won't "support any plan that harms the middle class, jeopardizes guaranteed Social Security benefits or increases the benefits."

The Social Security program now takes in more than it pays out. The federal government uses that money to pay for other programs and gives the Social Security trust fund promissory notes to pay back the money later. Beginning about 2018, some of those debts will come due. And by about 2042, as fewer workers support more retirees, the program will not have enough to pay all the benefits promised.

Bush's plan would add the individual savings accounts for workers younger than 55. Younger workers would in turn give up some of their future Social Security checks as a trade-off for having the personal accounts, which would be funded with Social Security taxes.

Bush's plan does not solve the long-term insolvency problems of the program and would be paid for by increasing the deficit. He has argued it is an important way to harness the power of compounding interest for workers.

But a study released Wednesday by the nonpartisan think tank Economic Benefits Research Institute said most age groups would fare worse under a plan like Bush's than under proposals to increase Social Security taxes on wealthy workers. Social Security now taxes wages up to only $90,000, but some lawmakers have pushed to raise or get rid of that cap and subject all earnings to Social Security taxes.

EBRI also compared individual accounts with doing nothing and found workers born in 1985 or later came out better with the accounts. If nothing is changed, the Social Security system would have to cut benefits drastically or raise taxes beginning in 2042.

"A thoughtful plan, whatever that may be, is going to be better for today's young workers than doing nothing at all," said Craig Copeland, author of the EBRI study.